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2Strategic Management Is crucial to building a successful business.Involves developing a game plan to guide a company as it strives to accomplish its mission, goals , and objectives, and to keep it on its desired course.

3Building a Competitive AdvantageThe aggregation of factors that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its competition.

4Key: Core CompetenciesUnique set of capabilities a company develops in key areas, such as superior quality, customer service, innovation, team- building, flexibility, responsiveness, and others that allow it to vault past competitors.

5Contd.. They are what a company does best.Best to rely on a natural advantage (often linked to a company’s “smallness”).

7Developing a Strategic PlanUse a short planning horizon-2 yrs or lessBe informal, use shirtsleeve approachEncourage participation of othersDo not begin with setting objectivesMaintain flexibility-conditions change too fastFocus on strategic thinking, not planningPlanning will be an ongoing process

10Step 1: Develop a Vision and Create a Mission StatementVision – the result of an entrepreneur’s dream of something that does not exist yet and the ability to paint a compelling picture of that dream for everyone to see.A clearly defined vision:Provides directionDetermines decisionsMotivates people

11Step 1: Develop a Vision and Create a Mission StatementAddresses question: “What business are we in?”The mission is a written expression of how the company will reflect an entrepreneur’s values, beliefs, and vision – more than just “making money.”Serves as a “strategic compass.”

12Step 1: Develop a Vision and Create a Mission StatementSurvey of employees: 89 percent of employees say their companies have a mission statement but…Only 23 percent of workers believe their company’s mission statement has become a way of doing business!

13Step 2: Assess Company Strengths and WeaknessesPositive internal factors a company can draw on to accomplish its mission, goals, and objectives.WeaknessesNegative internal factors that inhibit a company’s ability to accomplish its mission, goals, and objectives.

14Step 3: Scan for Opportunities and ThreatsPositive external factors the company can exploit to accomplish its mission, goals, and objectives.ThreatsNegative external factors that inhibit the firm's ability to accomplish its mission, goals, and objectives.

15The Power of External Market ForcesTechnologicalCompetitiveEconomicPolitical and RegulatorySocial and Demographic

17Identifying Key Success FactorsList the skills, characteristics, and core competencies that your business must possess if it is to be successful in its market segment.Conclusions:Key Success FactorHow Your Company Rates1.Low High2.3.4.5.

18Step 5: Analyze CompetitorsStudy: Small business owners believe they operate in a highly competitive environment and the level of competition is increasing.Yet, 97 percent of all U.S. businesses do not systematically track the progress of their key competitors.

19Step 5: Analyze CompetitorsAnalyzing key competitors allows an entrepreneur to:Avoid surprises from existing competitors’ new strategies and tactics.Identify potential new competitors and the threats they pose.Improve reaction time to competitors’ actions.Anticipate rivals’ next strategic moves.

21CONTD.Attend trade shows and conferences and study competitors’ sales literature.Watch for employment ads from competitors to get an idea about their plans for the future.Conduct patent searches for patents competitors have filed.Get reports that provide information about the factories of competing manufacturers.

23Knowledge ManagementThe practice of gathering, organizing, and disseminating the collective wisdom and experience of a company’s employees for the purpose of strengthening its competitive position.Knowledge management involves:Taking inventory of the special knowledge the people in the company possess.Organizing that knowledge and disseminating it to those who need it.

24Is Setting Goals and Objectives Really Important?“Would you tell me, please, which way I ought to go from here?” said Alice.“That depends a good deal on where you want to get to,” said the Cheshire cat.“I don’t much care care where.…” said Alice.‘Then it doesn’t matter which way you go,” said the cat.

25Step 6: Create Company Goals and ObjectivesGoals-the broad, long-range attributes a business seeks to accomplish, tend to be general and sometimes abstractObjectives-more specific targets of performance, commonly addressing areas such as profitability, productivity, growth, and other key aspects of business

29Cost LeadershipGoal: to be the low-cost producer in the industry (or market segment).Low-cost leaders have an advantage in reaching buyers who buy on the basis of price, and they have the power to set the industry’s price floor.Works well when:Buyers are sensitive to price changes.Competing firms sell the same commodity products.A company can benefit from economies of scale.

30DifferentiationCompany seeks to build customer loyalty by positioning its goods or services in a unique or different fashion.Idea is to be special at something customers value.Key: Build basis for differentiation on a distinctive competence, something that the small company is uniquely good at doing in comparison to its competitors.

31FocusCompany selects one or more customer segments in a market; identifies customers’ special needs, wants, or interests; and then targets them with a product or service designed specifically for them.Strategy builds on differences among market segments.Rather than try to serve the total market, the company focuses on serving a niche (or several niches) within that market.

32Step 8: Translate Strategies into Action PlansSurvey of senior executives: Companies achieved only 63 percent of the results in their strategic plans.Create projects by defining:PurposeScopeContributionResource requirementsTiming

34Balanced ScorecardsA set of measurements unique to a company that includes both financial and operational measuresGives managers a quick, yet comprehensive, picture of a company’s overall performance.

35Balanced Scorecards Four Perspectives:Customer: How do customers see us?Internal Business: At what must we excel?Innovation and Learning: Can we continue to improve and create value?Financial: How do we look to shareholders?

36Financial PerspectiveThe Balanced Scorecard Links Performance MeasuresFinancial PerspectiveGoalsMeasuresHow do we lookto shareholders?How do customerssee us?At what must weexcel?Customer PerspectiveGoalsMeasuresInternal Business PerspectiveGoalsMeasuresInnovation and Learning PerspectiveCan we continue toimprove and createvalue?GoalsMeasures